International Journal of Construction Management

ISSN: 1562-3599 (Print) 2331-2327 (Online) Journal homepage: https://www.tandfonline.com/loi/tjcm20

Assessment of challenges and risk factors

influencing the operation of emerging contractors
in the Gauteng Province, South Africa

Linda Bikitsha & Christopher Amoah

To cite this article: Linda Bikitsha & Christopher Amoah (2020): Assessment of challenges and
risk factors influencing the operation of emerging contractors in the Gauteng Province, South Africa,
International Journal of Construction Management, DOI: 10.1080/15623599.2020.1763050

To link to this article: https://doi.org/10.1080/15623599.2020.1763050

Published online: 14 May 2020.

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INTERNATIONAL JOURNAL OF CONSTRUCTION MANAGEMENT
https://doi.org/10.1080/15623599.2020.1763050

Assessment of challenges and risk factors influencing the operation of emerging

contractors in the Gauteng Province, South Africa
Linda Bikitsha and Christopher Amoah
Department of Quantity Surveying and Construction Management, University of the Free State, Bloemfontein, South Africa

ABSTRACT KEYWORDS
This study investigated whether the risk factors and challenges emerging contractors encounter have an Cash flow; challenges;
impact on their business operations and sustainability within the construction industry. The study economic drivers; emerging
adopted the qualitative research approach to meet the study objectives and aims. Semi-structured ques- contractors; risk factors
tionnaires were used to interview participants from emerging contractors with Construction Industry
Development Board (CIDB) Grading one (1) to four (4) in the Gauteng Province, South Africa. Qualitative
content analysis for the collected data by grouping the responses into themes and frequency and per-
centage derived for the various themes. The main findings of the study revealed that the challenges
affecting emerging contractors are the lack of financial support from the commencement of projects and
during project execution; the extraordinary level of competition among the pool of emerging contractors
and delay in payment from government institutions and client which have impacted their business opera-
tions. The study was done on emerging construction companies that are in the Gauteng Province of
South Africa only, but the results may be applicable in other provinces, even beyond South Africa. The
empirical results confirmed that the challenges and risk factors which have been identified as lack of
financial support from financial institutions in the initial stage of projects and during project execution;
high level of competition among emerging contractors and delay in payment from government institu-
tions and client faced by emerging contractors have an impact on their operations and sustainable
growth in the construction industry.

Introduction (Construction Industry Development Board (CIDB) 2015). The

Infrastructure development has been a driving force and enabler
for economic growth for a developing country such as South
Africa (Development Bank of Southern Africa (DBSA) 2012).
The infrastructure sector thus attracts numerous aspiring entre-
preneurs, all hoping to get a piece of the pie (Thwala and
Mofokeng 2012). Among these are emerging contractors who
have shown a radical increase brought about through the trans-
formation in the construction industry (Ludwig and Root 2010).
The term emerging contractor, according to Construction
Industry Development Board (CIDB) (2013), is defined as “an
enterprise that is owned, managed and controlled by previously
disadvantaged persons and which is overcoming business
impediments arising from the legacy of apartheid.” Emerging
contractors are recognised as powerful tools for generating jobs,
especially in consideration of their nature of being labour inten-
sive and predominantly grounded on technical skills that are
able to satisfy the needs of the communities such as employment
and skills transfer (Thwala and Mvubu 2008; Hove 2016).
Merana (2018) believes that emerging contractors’ inability to
raise financial means and efficiently manage cash flows is a con-
sequence of inadequate financial planning and lack of knowledge,
such as the available financial institutions that assist small busi-
nesses. In addition, emerging contractors are often faced with
inconsistent work continuity due to the great level of competi-
tiveness among bidding emerging contractors – with CIDB
Grade one (1), occupying 88% of registered contractors
poor project delivery of emerging contractors has been associated
with the lack of government incentives to support emerging con-
tractors (Worku 2016). The lack of project management skills is
amongst the prevalent challenge that emerging contractors
encounter (Akaba, Patient, and Agbobli 2016; Mavetera,
Sekhabisa, Mavetera, and Choga 2015). Thwala and Phaladi
(2009), Windapo and Cattell (2011), Mofokeng (2012) and Ntuli
and Allopi (2014), found out in their studies conducted on the
management aspect of emerging contractors that they failed due
to poor financial management and the lack of proper manage-
ment systems.
A study conducted among experts suggested that project fea-
tures, project parties, resources, and site conditions are critical
factors that commendably contribute to the improbability in con-
struction project cost and schedule overruns (Abd El-Karim,
Mosa Elnawawy, and Abdel-Alim 2017). Hence, Abd El-Karim
et al. (2017) suggest that these factors must be considered in pre-
dicting time contingencies and project budget. Again, poor esti-
mations resulted from incorrect pricing, and unrealistic rates of
critical items from inexperienced emerging contractors were
identified as the fundamental basis for project failures (Marena,
2018). Merana (2018) also found that late payment for the com-
pleted work/projects for the emerging contractors causes delays
leading to a lack of resources for either complex or large con-
struction work. These findings have also been confirmed by
Thwala and Phaladi (2009), in their exploratory study of prob-
lems facing small contractors in the North West province of

CONTACT Christopher Amoah amoahc@ufs.ac.za

ß 2020 Informa UK Limited, trading as Taylor & Francis Group
2 L. BIKITSHA AND C. AMOAH
Table 1. CIDB registration comparison for CIBD Grade one (1) to four (4).
Grading 2014/2015 2015/2016 2016/2017 Ranking
1 101,495 132,265 146,140 Highest
2 4780 4220 9064 Second Highest
3 1876 1592 3110 Fourth Highest
4 2368 2075 4265 Third Highest
Source: CIDB (2015:25; 2016:19 and 2017:19).
South Africa. Hove (2016) also agrees in his research about the
financial challenges facing emerging contractors in developing
countries using the critical incident technique: a case study of
the South African construction industry, that emerging contrac-
tors face financial challenges due to late payments (Merana
2018). Contractors that are unable to undertake profitable proj-
ects to generate income will never increase their CIDB grade and
therefore remain stagnant in the industry. Similarly, if a contrac-
tor does have a project, but is unable to generate sufficient cash
flow, the project and business will both suffer (Govender 2017).
To reduce the chances of construction projects failure, it is rec-
ommended that contractors take into account the significance of
management and treatment of risk factors related to construction
projects. Contractors are advised to exercise satisfactory project
planning that would allow them to foresee these risk factors
(Renault et al. 2016).
From the above discussions, it can be seen that uncertainties
confronting the emerging contractors are mainly late payment,
poor pricing, and lack of jobs due to overcrowding of emerging
contractors, poor planning and management, limited experience
and/or lack of financial and training support structures.
However, limited research has been done to cover the topic of
risk management by the emerging contractor. Hence, this study
aims to investigate how emerging contractors within the CIDB
grade 1 to 4 manage the identified risks which affect the cash
flow and the sustenance of their companies.
Literature review
Emerging contractors in South Africa
Small, Medium, and Micro-sized Enterprises (SMME’s), which
are also referred to as emerging contractors in this study, have
been identified as key role players in the economic growth of
developing countries such as South Africa (Aigbavboa and
Thwala 2014). This is evident through their ability to contribute
towards job creation, general social development, and economic
advancement, which are identified factors crucial towards the
success of accomplishing economic growth (Aigbavboa and
Thwala 2014). However, emerging contractors experience numer-
ous challenges that impact their financial management and plan-
ning for the execution of projects. The government has been
identified to be a catalyst towards supporting emerging contrac-
tor needs through applying a progressive approach of building
an environment that allows emerging contractors to gain max-
imum benefits and minimise their risks and challenges (Gasa
2012). To alleviate these barriers:- emerging contractors should
be allowed to operate in a fair market and be able to respond to
domestic requirements while preserving and increasing their
medium to long term real incomes (Gasa 2012). According to
Olawale and Garwe (2010), the business environment in the con-
struction industry is impacted by both internal factors and exter-
nal environmental factors - of which include state variables that
may be uncontrollable by new SMME’s. Olawale and Garwe
(2010) state that failure to nurture incoming SMME’s will impact
the economic progress of South African.
According to Gasa (2012) the registration of contractors is
established to (a) manage risk during procurement; (b) minimise
administration during tendering; (c) minimise costs to contractor
and client; (d) create a platform for accessibility for available
work; (e) assess contractor performance and (f) create the data-
base for existing contractors, their development and perform-
ance. The continuous addition of new entrants into the South
African construction industry, as observed through the
number of registrations in the Register of Contractors (RoC) (see
Table 1), undermines the sustainability of other emerging con-
tractors who were trying to establish their competitiveness reli-
ability (Gasa 2012). The number of new entrants continues to
increase and post threat in many aspects, such as work opportu-
nities, consolidation, improved performance, and market confi-
dence (Gasa 2012). This study has chosen to look into emerging
contractors with CIDB Grade one (1) to four (4) as they show
the highest level of increasing competitiveness.
From Table 1, it is evident that the numbers of contractor
registrations with CIDB are highest for CIDB Grade one (1) and
two (2) consecutively. The CIDB grades 1 and 2 are the entry-
level for any registering construction company from 2015 to
2017. More companies have registered in this industry in the
hope of gaining from public and private investments made in
the construction industry. It is evident why there is so much
competition for emerging contractors as more and more compa-
nies are being added into the database.
The importance of SMME’s in the South African
construction industry
It is acknowledged that SMME’s are indeed significant contribu-
tors towards the national economic growth and development
and are recognised as a driver for alleviating the unemployment
rate in South Africa as defined by the National Credit Regulation
Act (Aigbavboa and Thwala 2014). It is significant to incubate
new and incoming SMME’s towards development and sustain-
ability for the economic prosperity of South Africa. If new and
incoming SMME’s are not established, South Africa risks a lack
of economic progress (Olawale and Garwe 2010). The infrastruc-
ture development challenges facing the South African construc-
tion industry comprise of housing construction, electrical, sewer,
and water sanitation infrastructure backlogs (Construction
Industry Development Board (CIDB) 2004). Larger building con-
struction companies or those with higher CIDB grading are
prone to sub-contracting a portion of their contractual work to
smaller contractors (SMME’s) to decrease or eradicate these
backlogs. SMME’s have, however, been recognised to require
thorough planning and effective management skills to commend-
ably manage their performance (Ladzani, Smith and
Pretorius 2012).
SMME’s play a crucial role through numerous generic devel-
opment goals. SMME’s contribution to economic growth
includes employment creation, especially among poverty-stricken
communities and or rural areas (Chimucheka 2013). SMME’s
alleviate poverty through their ability to conglomerate society’s
resources resourcefully to create goods and services for the com-
munity in which they function (Du Toit et al. 2009:49). SMME’s
are able to generate many employment opportunities to the gen-
eral population of the community, which balances the gap of
income inequity, which allows for equity and participation (Du
Toit et al. 2009). SMME’s are recognised both nationally and

internationally as an essential role player in encouraging and
successfully attaining economic growth, development, and sus-
tainability, through the prevalent creation of wealth and employ-
ment, which allows for social stability (Nieman &
Neuwenhuizen 2009).
SMME’s make an input towards sustainable development
through reducing the crime rate, alleviating poverty, job creation,
and contributing to economic growth (Yanta 2001) and commu-
nity development (Chimucheka 2013). SMME’s have been able
to provide employment, which is necessary for the increasing
population (Du Toit et al. 2009). According to Nieman and
Neuwenhuizen (2009), SMME’s contribute 43% of the total value
of salaries and wages paid in South Africa through employment.
SMME’s compete against large businesses and encourage the
improvement of the quality of products and services through
increased competition in the number of SMME’s which allows
for increased competition among contractors, and that improves
the quality of the work for contractors generally (Du Toit et al.
2009). SMME’s have been found to assist in the success of larger
firms through facilitating the function of distribution and supply
for larger firms (Du Toit et al. 2009).
Emerging contractor challenges in South Africa
According to Thwala and Phaladi (2009), the lack of effective
management from the beginning of the project execution is
related to the challenges encountered by emerging contractors.
Failure to execute effective planning at the initial stage could be
related to the lack of basic management skills, which inevitably
leads to poor profitability and sustainability (Thwala and Phaladi
2009). Emerging contractor challenges can be identified as poor
contract negotiation skills, lack of finances and experience for
specialised projects and late payment for work done, lack of
resources such as machinery and plant, poor procurement skills,
lack of business and management skills, inability to source skilled
labour to execute projects and insufficient finance (Thwala and
Mofokeng 2012). Ofori (2009) recognized significant characteris-
tics in the construction industry that negatively affects emerging
contractors. These features include unavailability of finance for
projects, the numerous administrative approval process that is
required before contractors are considered for a project, lack of
work continuity that results when projects are completed, and
the low level of bargaining power of contractors (Ofori 2009).
The number of entry-level CIDB registrations from year to
year has been increasing at an alarming rate and has created
unreasonable competitiveness for emerging contractors. The
CIDB is defined as ‘a national body established by an Act of
Parliament (Act 38 of 2000) to oversee the sustainability and
growth of construction enterprises across the country’ (Western
Cape Government 2019). The Construction Registers Service
constitutes the ‘Register of Contractors’ and the ‘Register of
Projects, which have been established in terms of the CIDB Act
No. 38 of 2000 (Construction Industry Development Board
(CIDB) 2004). Contractors are graded and categorised according
to their financial and works capability by the Register of
Contractors. Public Sector clients are obliged to apply the regis-
ter when considering construction works tenders. The public sec-
tor relies on the Register of Contractors to facilitate procurement
and promotes contractor development.
Tshivhase and Worku (2012) conducted a study in Limpopo
Province, which showed that emerging contractors lack artisan
skills, engineering skills, and start-up capital. Emerging contrac-
tors have also been observed to be incapable of networking with
INTERNATIONAL JOURNAL OF CONSTRUCTION MANAGEMENT 3
well-established construction companies and fail to penetrate the
local emerging market (Worku 2016). Worku (2016) believes
that emerging contractors are usually unable to fulfil the client’s
expectations due to their low capacity, poor technical skills, and
failure to complete projects according to the contract period.
Emerging contractors are associated with incompetence to main-
tain specification requirements with clients due to lack of apti-
tude and know-how (Worku 2016).
Emerging contractor risk factors
Risk in construction projects may be defined as the probability
of a damaging event affecting the project, and the riskiness of a
project is mostly determined by (1) the choice of governance
structures, (2) the contractual arrangements which determine the
risk allocation between parties and (3) the use of financial instru-
ments such as insurance and guarantees (Chang 2011; Baloi and
Price 2003). According to Chang (2011), the riskiness of a pro-
ject is mostly determined by (1) the choice of governance struc-
tures, (2) the contractual arrangements which determine the risk
allocation between parties, and (3) the use of financial instru-
ments such as insurance and guarantees. According to Thwala
and Mvubu (2008), emerging contractors struggle to get assist-
ance from the banks unless they are willing to pay excessive
interest rates, which are not financially feasible for their finances
at the time. This leads to a lack of funding pre-construction,
which automatically inhibits emerging contractors from guaran-
tee and performance bond requirements which results in finan-
cial constrictions during the construction phase (Thwala and
Mvubu 2008).
Likewise, Kamal et al. (2019) categorised critical risk factors
affecting contractors’ ability to execute the project as cost, time,
and quality risk factors. The most critical risk factor affecting the
cost aspect of the project was rework due to the errors made by
contractors, and the critical risk factor affecting the contractor’s
ability to achieved the desired quality of the project was identi-
fied stated as poor supervision, whilst that of the time aspect of
the project was identified as inadequate project management.
Kamal et al. (2019), therefore, proposed the appointment of
proper site management team with the required authority and
power to make project decisions and not appointing contractors
based on low tender price as the solutions to these critical risk
factors affecting building projects. Again, Mohamed et al. (2015)
identified three most important risks involving in construction
projects as safety and health, technical and financial risks, and
identified the risk impacting cost and time as financial risk and
management risk, respectively. In a study done by Shayan et al.
(2019), they identified critical success factors for project execu-
tion as project management capacity of the executing organisa-
tions, knowledge and experience level of the personnel, early
involvement of contractors, and socio-cultural forces within the
project environs. They, therefore, recommended that construc-
tion professionals should prioritise critical success factors in their
risk management excises to have project plans and decisions on
risk events.
According to Chang (2011), a business relationship is mainly
regulated by the contract, which is signed by both parties (con-
tractor and sub-contractor or client and contractor), where the
terms of the contracts are stipulated to divide risk allocation
before the project execution. It is important to note that all proj-
ects in the construction industry are unique and may be open to
unique risks (Baloi and Price 2003). Contractors need to be able
to not only identify risks but to also assess those identified risks
4 L. BIKITSHA AND C. AMOAH
Figure 1. Data analysis process used for this study. Source: adopted from
Creswell (2014).
for them to attain successful project completion, as it attempts to
structure the diverse risks that may affect a project (Rezakhani
2012). When these risks have been identified and assessed by the
contractor, they need to be allocated accordingly or managed
(Rezakhani 2012).
Methodology
The study adopted a qualitative research methodology using
both primary and secondary data. The primary data was sourced
from interviews using a semi-structured interview guide from
purposively selected respondents, and the secondary data was
collected from various sources such as books, journal articles (lit-
erature reviews), government documents, newspapers, official
websites as well as other news media (see Figure 1). According
to Polit and Beck (2017), the main feature of the qualitative
research approach is to confirm that the outcome of the study
corresponds accurately with the experiences and the views of the
participants, but not the perception of the researcher. The inter-
pretivist paradigm was adopted by the researcher as it often pur-
sues experiences and perceptions of individuals for their data
rather than rely on quantities from statistics (Thanh and Thanh
2015). The qualitative methodology is grounded in an
“interpretivist” position emphasises that the researcher is focused
on how the phenomena of interest are construed, understood,
experienced, produced or established (Mason 2002). This study
adopted an Interpretivist position. The primary aim of this study
is to inquire into what individual perspectives (thoughts and feel-
ings) exist across the organisation on the key challenges and risk
factors that influence their business operations and interpret
these findings in the context of the responses from the
participants.
The data were collected through a semi-structured interview
guide composed of both closed-ended and open-ended questions.
The closed-ended questions deal with the demographic features
of the participants, such as their qualifications, management
level, experience in the construction industry, and CIDB grading
(see Table 2). The open-ended questions deal with the challenges
and risk factors concerning their business, how they manage the
challenges and risks they experience, and how the government
can assist them in their business (see Tables 3–7). They were
administered through face-to-face and/or telephonic interviews
due to time and budget constraints. According to Blumberg
et al. (2008), the personal interviews enables the researcher to
secure in-depth information during the interview process as the
interviewer can further ask questions for more clarity in situa-
tions where the responses are unclear. The researcher has nar-
rowed the study to a target population composed of emerging
contractor private companies with registered CIDB Grading one
(1) to four (4) in the Gauteng Province, South Africa. The
researcher used purposive sampling for the respondents of this
study, and the researcher personally interviewed the participants
through the use of a semi-structured interview guide. This
method of data collection enabled the researcher to further
enquired clarification from the respondents when the responses
were not clear enough. The respondents were also able to clarify
the questions asked before giving their answers, and hence the
researcher was able to get rich responses from the respondents.
Personnel and/or professionals such as site agents, project man-
agers, contract managers, general managers, and company direc-
tors who have been involved in the procurement process of
projects being executed and the running of the business. Of the
35 emerging contractors who were invited to participate in the
study, 15 of them responded. Huysamen (1991) suggests that
researchers should not use samples lower than 15 units of ana-
lysis, but preferably the one which is more than 25 units of ana-
lysis. Creswell (2007) suggests a sample size of 20 to 30
interviews as adequate; however, Guest, Bunce, and Johnson
(2006) interviewed participants in their study and realised a
point of saturation of themes at the twelfth interview. Again,
Hennink, Kaiser, and Marconi (2017) came to a saturation point
at the 9th interview, where no additional issues were raised. In
this study, after the13th interview, we realised the repetition of
issues by the subsequent participants; hence the 15 participants
used is more than enough for qualitative analysis.
The qualitative data analysis was used in this study which
focuses on meanings rather than on quantifiable occurrences;
studies have in-depth and detailed information rather than
emphasis and categories; seeks sensitivity to context rather than
generalisation and it has unbiased rich descriptions of the world
rather than measurements of specific variables (Schutt 2012).
The researcher captured, analysed, and interpreted the data after
being cleaned and coded. A qualitative content analysis process
in Figure 1, proposed by Creswell (2014), was adopted.
The data was then presented in a table format for ease of ref-
erence for readers. To maintain the participant’s confidentiality,
no identification was required to ensure neither the integrity of
participants nor that of the company or organisation is compro-
mised. Figure 2 summarises the research methodology followed
in this study.
Findings
Respondents features
The features respondents the respondents who participated in
the study are presented in Table 2. Most of the respondents
(26.67%) hold a diploma degree qualification. Again the majority
(80%) of the respondents in this study hold a higher level of
management position whilst 60% of the respondents had less
than five years’ experience in the construction industry. On the
other hand, the majority (53.33%) of the respondent’s
 INTERNATIONAL JOURNAL OF CONSTRUCTION MANAGEMENT 5

Figure 2. Research process adopted.

Source: Researcher’s construct, 2020.

Table 2. Respondents features.

Table 3. Respondents views on challenges faced by emerging contractors.
Features Number Percentage
Question Responses Frequency Percentages
Qualification
Secondary Certificate 3 20% Challenges faced Financial support to 8 32%
by emerging contractors start projects
Diploma 4 26.67%
or as an emerging which affect
Degree (Undergraduate) 2 13.33% contractor procurement
Honours 1 6.67% Turnaround time 1 4%
Masters 3 20% for payments
Other (NQF levels and trade certificate) 2 13.33% Competition among 3 12%
Level of Management other emerging contractor
Middle Management 3 20% Inability to source funding 3 12%
Higher Management 12 80% Limited Financial Resources 5 20%
Lower Management 0 0% Delay in payments by 5 20%
Experience in the construction industry government departments
Less than 5 years 9 60% and clients
Between 5 to 10 years 3 20% Source: (Researcher’s construct, 2019).
More than 10 years 3 20%
Company CIDB Class of Works
Civil Engineering Works (CE) 8 53.33%
Electrical Engineering Works – Building (EB) 1 6.67% physical, logistical, financial, and managerial risk factors that
Electrical Engineering Works – Infrastructure (EP) 1 6.67% were identified by the respondents.
General Building Works (GB) 3 20%
Mechanical Engineering Works (ME) 2 13.33%
Specialist Works (S-), specify 0 0%
The impact challenges and risks on the
organisations have registered with CIDB in the Civil Engineering company’s operations
Works (CE) category. Respondents were asked to indicate how the identified challenges
and risks affect their operations in the construction environment.
Emerging contractor challenges and risks factors The responses to this question are indicated in Table 5.
From Table 5, respondents identified cash flow as the most
The respondents were asked to respond to questions regarding (18.18%) affected by prevalent risk factors followed by the integ-
the challenges and risks they face as emerging contractors. The rity or damaged reputation of the company (13.64%).
responses for this question were recorded and grouped based on
their similarities; their frequencies were then calculated to get
results in percentages, as indicated in Tables 3 and 4.
Table 3 highlights the diverse responses of the emerging con- Respondents views on how the company manages
tractor’s companies. However, it is clear from Table 6 that finan- risk factors
cial constraint is the major challenge for emerging contractors
among the challenges identified. Other challenges presented The question in Table 6 was asked to the respondents since
include turnaround time for payments, inability to source fund- the researcher wanted to identify how the respondents address
ing, limited financial resources, and delay in payments by gov- risk factors they encounter. From Table 6, 14% of the
ernment departments and clients. respondents mentioned the training of new staff on project
On the other hand, Table 4 shows the respondent’s skill to avoid compromising the quality aspect of the project;
responses to the question regarding the risk factors that affect ensuring production, time and procurement management is
their business operation. Respondents have identified preva- executed effectively; employing qualified staff; creating reason-
lent risk factors such as the use of main contractors to able cash flow projections, and taking on jobs the company
develop sub-contractors, which is not facilitated by the client, can manage to finish respectively. Then about 10% mentioned
poor financial management, lack of work continuity to it is better to work as the main contractor than as a sub-con-
improve company skills, and lack of payment from main con- tractor and sourcing funds from financial institutions,
tractors amongst others. The risks presented categorically are respectively.
6 L. BIKITSHA AND C. AMOAH

Table 4. Respondents views on risk factors that are prevalent among emerging contractors.
Question Responses Frequency Percentages
What are the risk factors prevalent Lack of consistent/continuity work to 5 11.11%
among emerging contractors? improve company skills
Work is very labour intensive, but no 4 8.89%
allowance is made for most
overhead costs that sub-
contractors incur
Lack of staff with relevant 2 4.44%
construction experience
and knowledge
Project Delays 2 4.44%
Theft of tools and material 2 4.44%
Lack of Project Management 3 6.67%
Poor Financial Management 4 8.89%
Working without a formal contract 1 2.22%
Political interference 1 2.22%
Poor costing skills 4 8.89%
Lack of payment from main 6 13.33%
contractors and clients
Tender evaluation criteria always put 3 6.67%
emerging contractors at a
disadvantage because of a lack of
work experience
Delivering quality work on projects 2 4.44%
The government system of using main 6 13.33%
contractors to develop sub-
contractors
Source: (Researcher’s construct, 2019).

Table 5. Respondents views on the impact of risk factors on the company’s operation.
Question Responses Frequency Percentages
How have the above-mentioned risk Consistent quality delivery of 2 9.09%
factors impacted the operation of projects affected
the company? Company integrity compromised 3 13.64%
Clients are not satisfied with 1 4.55%
work rendered
Employees are unhappy 2 9.09%
Cash flow affects business operations 4 18.18%
Costs are incurred due to project 2 9.09%
delays which are poor
project management
Loss of work 2 9.09%
Looking for sub-contracting jobs from 2 9.09%
bigger companies
Company liquidation 2 9.09%
Growth stagnancy 2 9.09%
Source: (Researcher’s construct, 2019).

Table 6. Respondents views on how risk factors been managed by the company.
Question Responses Frequency Percentages
How has the company managed the Training of new staff to acquire 3 14.29%
above-mentioned risk factors? project skill to avoid compromising
the quality of a new project
Working as the main contractor rather 2 9.52%
than as a sub-contractor
Creating reasonable cash flow 3 14.29%
projections
Ensuring effective execution of 3 14.29%
production, time and
procurement management
Employing qualified staff 3 14.29%
Equipping existing staff with 1 4.76%
empowerment courses
Interacting with government 1 4.76%
institutions
Taking on jobs the company can 3 14.29%
manage to finish
Sourcing funds from financial 2 9.52%
institutions
 INTERNATIONAL JOURNAL OF CONSTRUCTION MANAGEMENT 7

Table 7 . Respondents views on how the government could support emerging contractors to become sustainable and grow in the con-
struction industry.
Question
How do you think the government
could support emerging contractors to
become sustainable and grow in the
construction industry? Elaborate.
Responses Frequency Percentages
Setting aside projects for only 6 26.09%
emerging contractors instead of
insisting on main contractors
developing sub-contractors
Effective implementation of the 2 8.70%
percentage of sub-contracting on
bigger projects
Assisting with facilitating payment due 4 17.39%
to sub-contractors
Ensuring government department pay 1 4.35%
on time
Ensuring that contracts are awarded 1 4.35%
based on merit and the
specified criteria
Implementing financial, management 5 21.74%
and construction educational
courses for emerging contractors
Implementing structures against 4 17.39%
corruption in tendering

The support required from the government to sustain and
grow the emerging contractors
The researcher wanted to know the respondent’s views on the
help they need from the government to make their business sus-
tainable. The responses were grouped according to their similar-
ity and their frequencies determined. The frequencies were then
used to calculate the percentage values for each response, as indi-
cated in Table 7.
The respondents felt more strongly that the government
should set aside projects designated for their grading instead of
subjecting them to sub-contract under the main contractors as
more than often they don’t get paid their dues, amongst others.
Discussion of the findings
Risk factors and challenges influencing projects executed by
emerging contractors
From the findings, the risk factors and challenges that influence
project execution are; lack of financial support to start projects
which affects procurement; turnaround time for payments; com-
petition among other emerging contractors; inability to source
funding; limited financial resources; delay in payments by gov-
ernment departments and clients; lack of consistent/continuity
work to improve company skills; work is very labour intensive,
but no allowance is made for most overhead costs that sub-con-
tractors incur; lack of staff with relevant construction experience
and knowledge; project delays; lack of project management; poor
financial management; poor costing skills; lack of payment from
main contractors; tender evaluation criteria always puts emerging
contractors at a disadvantage because of lack of work experience;
delivering quality work on projects and government system of
using main contractors to develop sub-contractors instead of the
clients which is also not properly facilitated. These challenges
and/or risk factors are believed to influence project execution of
the emerging contractors.
As respondents 9 stated:
“Our main challenge is the payment delays for work done, especially
the government projects. They do not pay us on time, and this
ultimately affects our cash flow level. Our site workers at times
strike as a result of this since we are unable to pay their wages
and salaries”.
According to respondent 2, the lack of payment for work
done has caused some of the emerging contractors to be bank-
rupt. As he states;
“Some of our colleagues have left the business as they were unable to
sustain the pressure as a result of our client’s inability to pay for work
done on time. The payment problem is very serious, which hinders
our operations”.
On the other hand, respondents 6 attributed the major risk
factor as the numerous emerging contractors in the Gauteng
province competing for limited construction works. As a result,
some of them are unable to get access to works leading to the
folding up of their businesses. Respondent 3 supports the asser-
tion of the respondents 6 by saying that she folded up her busi-
ness for some time due to lack of work until she got the contract
for the construction of the government social housing. On the
same challenges and risk factors, respondents 1 stated that due
to their inability to get regular contracts and pay market-related
remuneration, some of the best-qualified staff they engage often
leave them and seek employment elsewhere. He gave an example
as quoted:
“I engaged a qualified and registered Quantity Surveyor who had
project management qualification as well. He managed my project very
well but left us for a better offer in another company”.
Respondents 4 and 12 also attributed their major challenges
and risk factor to poor financial management. They stated that
most emerging contractors do not know how to manage their
finances, especially when they receive payment from the client.
They cited a situation whereby some of them prioritise the pur-
chase of luxurious vehicles after receiving payment from the cli-
ent, instead of using the money to purchase materials or
investing back the money into the business. These practices have
some of them finding themselves in debt and even with tax offi-
cials for failing to pay taxes on payments received. These find-
ings support the findings of Merana (2018), who stated that one
of the major challenges facing emerging contractors is financial
limitations, and also emerging contractors have limited ability to
raise enough working capital to sustain themselves until their
initial claims are paid out. It has also been identified by Amoah
and Shakantu (2018) that often small contractors find themselves
working with any company that will give them work and under-
compensated as they accept poor rates for fear of getting no
8 L. BIKITSHA AND C. AMOAH
work. Emerging contractors risks such as physical risk factors
(unskilled labour), logistical risk factors (extremely high competi-
tion in bidding for tenders impacting work continuity), financial
risk factors (payment delays on claims, lack of financial resources
and advise and poorly managed cash flow) and managerial risk
factors (poor planning and poor project management) have also
been identified by Renault et al. (2016). Respondents also identi-
fied contractual agreement as to the most prominent risk factor,
which was also identified by Baloi and Price (2003) in
their research.
Impact of risk factors and challenges on the emerging
contractor projects execution
Respondents were asked to express their views on the impact of
risk factors and challenges on the execution of their projects. It
came to light that most of them have had their cash flow
dwindled as a result of the challenges such as their late payment
for the work done and their inability to get enough work as a
result of fierce competition for the few projects in the system. As
respondent 3 states:
“Our cash flow is depleted because there is no work for us. The work
we did for the municipality over 6 months ago has still not been paid,
so we have suspended work on-site and waiting for payment before we
go back. We used all our resources into this project.”
On the other hand, respondent 8 suggests that as a result of
the high number of emerging contractors within their CIDB cat-
egory in the system, getting work to do has not been easy and
that over a year now, they have not been able to win any con-
tract having bided for numerous projects. Again respondents 5
and 10 suggest that the challenges they face have, in some situa-
tions, affected their company’s reputations as they are unable to
complete the project due to cash flow problems. They also sug-
gest that the inability to get financial support also affects the
quality of their project as they may not be able to engage quali-
fied artisans and supervisors to work on their projects.
As respondents 10 states;
“I lost my qualified foreman because the project we did came to a
standstill due to cash flow challenges as a result of the client’s inability
to pay us on time. The replaced foreman I engaged, unfortunately, was
not having the same experience I expected and therefore most of the
work done by the workers was of poor quality, and we had to redo the
work which also affected our cash flow further”.
Respondents 11 and 13 stated that the cash flow and lack of
experienced workers have made them lost some bids as some cli-
ents consider these seriously in appointing contractors. Other
contractors have gone into liquidation due to lack of work,
stated by respondent 15. These findings are not surprising as it
has been identified by Thwala and Mofokeng (2012) that, many
emerging contractors have been naïve to believe there is a lot of
money to be made in the construction industry, unaware of the
complexity of risks prevalent to emerging contractors and that
often for these reasons, emerging contractors find themselves
without financial assistance both before and during the execution
of projects; hence, emerging contractors are susceptible to poor
cash flow, and many of these cases lead to unfortunate liquid-
ation (Thwala and Mofokeng 2012). It has also been observed by
Kamal et al. (2019), the most critical risk factor affecting the cost
aspect of the project as rework as a result of the errors made by
contractors. Delay of payments from the main contractor or cli-
ent in the literature indicates that the cash flow of emerging con-
tractors is negatively affected. According to respondent 15,
emerging contractors generally succumb to sub-contracting
agreements due to scarce work opportunities on tender and even
incur losses because the main contractors do not pay them for
work they have completed or delay the payments, which impact
their ability to execute projects continuously as they would like
to anticipate. These findings are also in line with the findings of
Thwala and Mofokeng (2012), where they identified that delay in
payment of emerging contractors is bleeding them out from both
private and the public sectors as it incapacitates them to appoint
and retain professionals within their businesses. Also, Morana
(2018) suggests that the lack of knowledge among emerging con-
tractors employees impacts their ability to execute projects suc-
cessfully as they may only afford to employ employees who lack
experience or no experience at all.
However, respondents 4 and 6 posit that increased competi-
tion and pressure during the initial phase, emerging contractors
are always trapped inefficient contractual negotiation and mere
desperation to attain any type of work or project. This is evident
as some respondents emerging contractors take on work that
they will not even profit from and have the insufficient muscle
to complete and often accept the work without any formal con-
tract from the onset, which opens up room for being taken
advantage of by main contractors. Research also states that the
level of competitiveness exists among emerging contractors, and
the number of new entrants continues to increase and challenges
continuity of work opportunities, consolidation, improved per-
formance, and market confidence (Gasa 2012).
Emerging contractors risk management strategies to
mitigate their risk factors
The researcher wanted to know the respondent’s views on risk
management strategies adopted in mitigating the risk factors.
Respondent 3 stated that the company tries as much as possible
to engage qualified staff to oversee the project to eliminate or
minimise the risk of poor project deliverables, and also, they
normally send the permanent staff for refresher courses in the
construction industry. This was also echoed by respondent 9,
who stated;
“Even last month, I sent my Quantity Surveyor to study how to use
WIN-QS to do the estimate. I learned it is easier and faster than using
an excel spreadsheet. In training, they were also trained on how to
transfer the information from the drawings into the estimating
software. I think this will help us to avoid mistakes in our estimates,
which is very costly to the company in the long-run.”
Other respondents also stated that in order for them to be
aware of the existence of projects, they have registered with
many government agencies so that they could be informed of
any projects that are going for tender. This will enable them to
tender for those projects when they come up. Respondents 8 and
11 stated that they had formed a strategic alliance with big con-
struction firms so that they can be engaged as sub-contractors
when they get projects. This strategy has helped and sustains
their companies over the years as they normally rely on these big
companies for the project. On the other hand, respondents 6
opined that he has an agreement with building material suppli-
ers, so they supplied them with the materials they need for their
project. As she states;
“I have a gentleman agreement with one of the material suppliers that
enable me to get all the materials I need for a project. I just make a
50% payment and pay the rest when I receive the payment from the
client. At times I even make no deposit for the materials.”
This partnership strategy lessens the pressure on their cash
flows and hence help them have sustainable cash flow

throughout the project. These findings support the view of
Anugwo and Shakantu (2017) that for small construction
firms to be sustainable and remain in business, they should
form a strategic alliance with other companies. Respondents 1,
4, and 7, stated that they only tender for the project they have
resources to manage in order not to be found wanting in
terms of capacity deficit. Where necessary, they seek financial
assistance from the financial institution where the company
has a bank account so that the bank can easily deduct the
amount due to them when they receive payment from the cli-
ent. They normally get reasonable interest rates from the
financial institution, and this also assists them to overcome
cash flow problems. Other respondents stated that, in order to
ensure the project is executed successfully, they make sure the
procurement aspect of the project is managed effectively to
avoid omissions at the later stage.
The support required from the government to sustain and
grow the emerging contractors
The researcher wanted to know the respondent’s views on the
help they need from the government to make their business sus-
tainable. The respondents believe that the government should set
aside projects designated for their grading instead of subjecting
them to sub-contract under the main contractors as more often
than not, they don’t get paid for work done. Respondents also
believe that the government should facilitate their payments
from main contractors as they are exposed to so much risk in
sub-contractual agreements. As stated by respondents 12;
“We often struggle to get paid from the main contractors when they
receive payment from the client. I think the client should pay us
directly instead of paying us through the main contractor”.
Respondents also raised the matter of the government imple-
menting educational courses for emerging contractors to improve
on their financial and business management skills, which are one
of the challenges that the government is experiencing in terms of
executing these educational programmes (Thwala and Mofokeng
2012). The respondents’ also believe that improving on the busi-
ness strengths is the best way to remain competitive in the con-
struction industry with working on aspects such as willingness to
adapt, being more informed and up to date with latest trends,
improving their quality of work and delivering projects on time
and this can be better facilitated by the government. They must
also eliminate corruption from the tendering process, opined by
respondents 8. This issue of corruption in the tendering process
was also mentioned by respondent 10, as he states;
“The corruption is too much in the government tendering process. You
tender for a project at a very good price, yet they give the project with
someone with even higher prices. I think they advertise the tender just
as a formality, they already knew who would win the contract.”
Other respondents requested the government to pay them on
time for work done as this problem of delayed payment is crip-
pling their business and has led to the collapse of many emerg-
ing contractors. This finding also supports the findings of
Amoah and Shakantu (2019), as they cited delayed payment as
one of the major issues confronting local contractors. Other
respondents suggested that the government should assign a por-
tion of the big project where they lack capacity if the govern-
ment wants the businesses of the emerging contractors to be
sustainable. As stated by respondent 5;
“What prevents the government from making it mandatory for a
portion of big contracts to be given to the emerging contractors in our
INTERNATIONAL JOURNAL OF CONSTRUCTION MANAGEMENT 9
category? They used to do it through the mentorship program. I do not
know what is happening now.”
These findings are also in line with the findings of Amoah
and Shakantu (2019), where local contractors requested a set-
aside policy from the government if the government wants them
to grow their businesses and capacities.
Conclusions and recommendations
Emerging contractors have been identified as economic drivers,
especially in developing countries such as South Africa. The
study has revealed that the challenges affecting emerging con-
tractors are the lack of financial support from the commence-
ment of projects and during project execution, high level of
competition among emerging contractors, and the delay in pay-
ment from government institutions and clients. The risks preva-
lent to emerging contractors are being subjected to poor
contractual agreements between main contractors, non-payment
from the main contractors, and lack of work continuity.
Emerging contractor’s challenges and risks are detrimental to
their business survival in the construction industry. Based on the
findings, a lot of government intervention such as training poli-
cies, prompt payments for work done, direct payment to subcon-
tractors, and eradication of corrupt practices from the tendering
process is necessary for the survival of emerging contractors in
South Africa.
In accordance with the finding presented by the study, the
following recommendations were made: Organisations such as
CIDB need to restructure the technical and financial standard
for entry into the CIDB registrations by possibly vetting and ver-
ifying information obtained from applicants as the level of com-
petition is high and needs to be managed for the future
development of existing emerging contractors. Government
departments need to be efficient in terms of payment of suppli-
ers as late, or non-payment is detrimental to the survival of
emerging contractors. The government may need to reinforce or
facilitate the payment contractually of emerging contractors as
they find themselves often not compensated by main contractors
for their hard labour and there should be structures in place to
protect emerging contractors from such risks. The government
needs to invest in facilitating sustainable programmes for devel-
oping or incubating emerging contractors through training and
educational courses. The government also may consider giving
emerging contractors independence by giving out more work on
their CIDB grading than having emerging contractors rely on
business from main contractors.
Disclosure statement
No potential conflict of interest was reported by the author(s).
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